basware interim report q1/2013/media/files/b/... · integration of certipost’s e-invoice business...

BASWARE INTERIM REPORT Q1/2013

Esa Tihilä, CEO

Mika Harjuaho, CFO

Basware’s Interim Report Q1/2013

April 11, 2013

Contents

• Business review of Q1/2013

• Financial review of Q1/2013

• Future outlook

Basware’s Interim Report Q1/2013 11.4.2013

Key events in Q1/2013

Market conditions, ongoing transition of the business model and renewal of the product and service portfolio impacted the first quarter:

• Net sales grew from services in line with our strategy

• 43 percent more significant Purchase to Pay deals than during Q1/2012

• The amount of significant e-invoice and SaaS deals was lower than expected; the decrease in license sales continued

• Integration process of the business acquisition of the leading e-Invoice operator in the Benelux, Certipost, started

• Global sales organization strengthened, focusing on buyer, supplier, and partner organizations

• Reseller agreement with Cintas, supporting Basware’s access to the small and mid-market in North America


Share of

recurring

revenue

increased to

61.9 percent

(57.1%)

11.4.2013

• Net sales EUR 29 828 thousand

(EUR 27 435 thousand)

• EBITDA EUR 233 thousand (EUR

3 188 thousand), 0.8 % of net sales

Q1/2013 in brief: Net sales increased amidst difficult

market conditions and transition from software to

service business

0

3000

6000

9000

12000

15000

18000

21000

24000

27000

30000

33000

Q1/10 Q1/11 Q1/12 Q1/13 Q2/10 Q2/11 Q2/12 Q3/10 Q3/11 Q3/12 Q4/10 Q4/11 Q4/12

• Operating profit/loss (EBIT) EUR -1 569

thousand (EUR 1 822 thousand), -5.3%

of net sales

• Earnings per share EUR -0.07 (EUR 0.11)

EUR thousand

Q1/2013 in brief: Net sales increased amidst

difficult market conditions and transition from

software to service business

• Growth in Automation Services continued, net sales up by

41.0%

• Market conditions & longer sales processes than usual

resulted to less amount of significant e-invoice and SaaS

deals than expected

• Share of recurring revenue (Customer Support and

Automation Services) of net sales grew, totaling to 61.9% of

net sales (57.1%)

• The transaction volume increased significantly compared to

the corresponding quarter in 2012

• Certipost’s restructuring expenses related to employment

relationships of approximately EUR 1.2 million booked in

Q1/2013


Transaction

volume

amounted to

12.7 million,

up 62.7%.

11.4.2013

Q1 transition in numbers

*The SaaS deal numbers exclude renewals & InvoiceReady

Q1/2013 Q1/2012

License sales

# of new P2P deals 31 15

SaaS*


Total


Growth in

# of new P2P deals +43%

11.4.2013 Basware’s Interim Report Q1/2013

SaaS versus license sales dynamics 2007-Q1/2013


0 %

10 %

20 %

30 %

40 %

50 %

60 %

70 %

80 %

90 %

100 %

2007 2008 2009 2010 2011 2012 Q1/2013

SaaS

License Sales

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

9,0

10,0

11,0

12,0

13,0

Q1 Q2 Q3 Q4

2010 2011 2012 2013Million

transactions

• The transaction volume

grew significantly

during the quarter:

the volume processed

by the Automation

Services business was

12.7 million, growth of

62.7%.

Growth of transaction volumes 2010-Q1/2013


EUR thousand

• Recurring revenue

(Customer Support and

Automation Services)

continued to account

for an increasing share

of net sales, totaling

61.9 % of net sales in

Q1/2013

Share of recurring revenue, rolling 12 months average


35,0 %

40,0 %

45,0 %

50,0 %

55,0 %

60,0 %

0

5 000

10 000

15 000

20 000

25 000

30 000

35 000

Net sales

Share of recurring

revenue, rolling 4

quarters average

Integration of Certipost’s e-invoice

business


• The business acquisition of the leading e-Invoice

operator in the Benelux, Certipost was closed on

January 2, 2013

• Synergy benefits through the combination of business

operations and technologies, joint infrastructure and

support functions:

– One-time restructuring costs of approximately EUR 1.2

million have been booked in Q1/2013 (previously estimate

EUR 2.3 million)

– The annual potential for cost-savings approximately EUR

2.3 million (previous estimate EUR 3.0 million).

• The operating profit of the acquired business is

expected to be approximately EUR 1.3 million negative

in 2013 (previous estimate slightly positive)

FINANCIAL REVIEW Q1/2013

Mika Harjuaho, CFO


• As of the first quarter in 2012 Basware Corporation reports one operating segment: Purchase to Pay, P2P.

• Basware reports income for products and services as follows: License sales, Professional Services, Customer Support, and Automation Services (previously License Sales, Professional Services, Maintenance, and Automation Services).

• Customer Support comprises of previous Maintenance and Extended customer support previously reported under Professional Services. Extended customer support agreements are continuous service agreements spanning several years. Customer Support and Automation Services together form the recurring revenue reported by the company.

• License Sales consist of the Purchase to Pay product family together with payment, financial planning and reporting solutions sold only in Finland. Automation Services include e-Invoicing, scanning services, printing services, catalog management, purchase message exchange, activation services and Software as a Service (SaaS) services.

• Basware reports the estimated revenue to be recognized for current Automation Services agreements that are in production as well as for new, signed agreements in the next twelve months. Automation Services agreements typically expand several years or are valid until further notice.

• As geographic information Basware reports geographical areas Finland, Scandinavia, rest of Europe and Other. In the geographical information net sales is split by customer’s location. Net sales and operating profit are also reported by the location of the assets. In annual financial statements the geographical information of non-current assets is reported by the location of the assets.


Reporting (IFRS)

11.4.2013

Q1/2013:

Change in

recurring

revenue

classification

Development of quarterly net sales & profit

EUR thousand Q1/13 Q1/12 Q2/13 Q2/12 Q3/13 Q3/12 Q4/13 Q4/12

Net sales 29 828 27 435 28 718 27 119 30 427

Growth % 8.7% 5.3% 5.3% 12.1% 0.7%

Other operating income 58 58 58 55 57

Materials and services 2 542 2 061 1 957 2 313 2 715

Personnel expenses 20 518 16 072 17 282 15 415 16 820

Depreciation and write-offs 1 801 1 366 1 495 1 809 1 823

Other operating expenses 6 594 6 171 6 745 5 376 6 199

Operating profit -1 569 1 822 1 298 2 261 2 927

21 000

28 000

35 000

Q1 Q2 Q3 Q4

2013 201224%

25% 24%

27%

Net sales 2012

Q1 Q2 Q3 Q4

Net sales


Net sales by operation Q1/2013

10 785

8 172

3 195

7 676

EUR thousand

Customer support Professional Services

Licenses Automation Services

Licenses = License sales of software products

Professional Services = Consulting services

Customer support = comprises of previous Maintenance and Extended customer support previously reported under

Professional Services. Extended customer support agreements are continuous service agreements spanning several

years.

Automation Services = e-Invoicing, scanning services, printing services, catalogue management, purchase message

exchange, activation services, SaaS services and opening fees

Customer

support,

growth

of 5.5%

License

sales,

decrease of

21.6%

Automation

Services,

growth

of 41.0%

Professional

Services,

growth of

6.2%


R&D in 2013

R&D expenses 15.5% of net sales

24.2% of personnel


R&D expenses amounted to EUR

4 622 thousand (EUR 4 251

thousand)

• Increase of 8.7 percent, 15.5

percent of net sales (15.5%)

• EUR 1 258 thousand (EUR

1 162 thousand) of R&D

expenses capitalized

• R&D costs included in the

P&L totaled EUR 3 364

thousand (EUR 3 089

thousand), or 11.3 percent

(11.3%) of net sales.

R&D unit personnel 356 (325)

• Including 153 people in India;

units also in Finland and

Romania

11.4.2013

Personnel

0

200

400

600

800

1000

1200

1400

Sales & Marketing

Consulting & Services

Products

Admin

Personnel groups

Finland

Rest of Europe

India

Other

Geographical location of personnel

Scandinavia


• 1 486 employees at the end of Q1/2013

• Number of personnel has grown fastest in

Indian office, and due to acquisition of e-

Invoicing business of Certipost in Belgium

• Average age of personnel is 34.2 years;

52.9% have an academic degree

11.4.2013

Q1/2013 in brief

EUR Million Q1/13 Q1/12

Net sales 29.8 27.4

Growth of net sales, % 8.7% 5.3%

Operating profit (EBIT) -1.6 1.8

Change of operating profit % -38.4%

% of net sales -5.3% 6.6%

Net profit/loss -1.0 1.5

Share of recurring revenue, % 61.9% 57.1%

Earnings per share, euro -0.07 0.11

Change of earnings per share, % -38.2%

Fixed costs 27.1 22.2

Growth of fixed costs, % 21.9% 11.5%

Personnel, March 31 1 485 1 241

Growth of personnel, % 19.4 26.9

Personnel costs 20.5 16.1

R&D expenses 4.6 4.3 Basware’s Interim Report Q1/2013

EBITDA

amounted to EUR

233 thousand

(EUR 3 188

thousand), a

decrease of

92.7%

Personnel

expenses include

EUR 1.2 million of

one-time

restructuring

costs

11.4.2013

Finance & investments

• Total assets on the balance sheet EUR 151 489 thousand


• Cash and liquid assets EUR 23 276 thousand (EUR 34 450 thousand)

• Cash flows from operating activities EUR 9 718 thousand


• Equity ratio 63.7 percent (70.5%)

• Gearing -13.2 percent (-35.2%)

• Total gross investments EUR 19 219 thousand (EUR 13 682 thousand)

– includes capitalized R&D expenses and acquisitions


Share & shareholders

• Number of shareholders 14 200 (14 964) at the end of March 2013

• Share price development during January–March 2013:

• Highest EUR 21.69 (EUR 19.95), lowest EUR 19.30 (EUR 16.70)

• Closing price EUR 20.20 (EUR 19.26)

• Average price of the share EUR 20.43 (EUR 19.04)

• Traded shares 312 873 (444 503)

• 2.4% (3.5%) of all shares

• Market capitalization EUR 259 540 124 (EUR 247 418 756)


FUTURE OUTLOOK

Esa Tihilä, CEO


• The market conditions were more difficult than before in the first quarter. Customers’ decision-making was slower than before. The negotiation times of large international deals in particular have been prolonged because the customers’ requirements are higher in the service business than in the software business.

• In spite of net sales growth falling short of the targets for the first quarter, quantitatively speaking, the company closed 43 percent more significant Purchase to Pay deals than during the corresponding period the previous year. This proves that the fundamental demand for the company’s products and services has remained at a good level.

• The next-generation Alusta software has not yet contributed to the growth of the company’s net sales as targeted, which is due sales and delivery ability being reached slower than planned. The maturity of the product is continuously improving with new features and updates. Basware Match Plan was launched during the first quarter, and it will be complemented with Basware Match Order, which will be launched during the latter half of the year. The first versions of new Basware Purchase and Analytics products will be launched during the second quarter, and they are expected to improve the company’s competitiveness further. The improved maturity of Alusta and new products are expected to enable the leveling off of the decrease in license sales during the rest of the year.

• The delivery ability of Alusta will improve while the number of customers put into production will increase. The improvement of delivery ability and shorter production lead times contribute to accelerating growth in net sales.

• We expect the company to grow more strongly during the rest of the year than in the first quarter, with the decrease in license sales leveling off and the growth of Automation Services continuing. The company’s fixed expenses will grow at a more moderate rate during the last three quarters than in the first quarter. We have increased the number of personnel during 2012, and we expect improvement of productivity to decrease the need for recruitments in our different functions in late 2013.

• In order to achieve our objective of accelerated global growth and maintain our product leadership in Purchase to Pay processes, the development of Alusta software and services will continue strongly this year as well. The share of R&D expenses of net sales is expected to decrease during 2013 compared to the level of 2012. The emphasis of R&D expenses will shift gradually from Alusta product development towards the service development of Automation Services.

• The company’s transition process is expected to reach a point where the investments will begin to pay themselves back in the form of increasing net sales and improved profitability during the latter half of the year.


Basware outlook 2013

11.4.2013

• Basware expects its net sales for 2013 to grow by more

than 15% and operating profit (EBIT) to grow compared

to the previous year.


Basware outlook 2013

11.4.2013

Basware’s updated strategy 2012-2015: cornerstones

Focused go-to-market approach

The world’s largest Basware Commerce Network

Maximize

transaction

volumes

Drive

consolidation

of e-invoicing

operators

Maximize

customer

loyalty

Ensure

profitability in

everything we

do

Leading product and service offering


Next steps

• Growth in net sales is supported by the focusing of our global sales efforts on buyer, supplier, and partner organizations

• Product and process improvements accelerate the entry of SaaS and e-invoice deals into production

• To build accelerated global growth and maintain our product leadership in Purchase to Pay processes, the development of Alusta software and services will continue

• Targeting different customer segments with Better Buying - Better Selling - Connected Commerce customer promises


Increased capabilities in delivery

and support to increase

customer satisfaction

More comprehensive customer

offering i.e. offering coverage

Alusta readiness ramped up to

customer expectations

Increased focus on activating

customers’ suppliers and buyers

Organization aligned with

strategy and customer types

Significant growth triggers

High growth through

acquisitions

Strong underlying market demand for P2P and e-invoicing


• Basware’s long-term objective to grow annually 15-30

percent in net sales boosted by over 50 percent growth

in Automation Services which is intact compared to the

previous strategy period.

• The long-term objective for operating profit margin

continues to be 15-20 percent of net sales which is

expected to improve towards the end of the period.

• The share of recurring revenue is aimed to grow to 70

percent compared with current 55 percent, with

Software as a Service (SaaS) and electronic invoicing

contributing most to the growth, thus improving the

profitability.


Objectives for the strategy period

until end of 2015

11.4.2013

NEXT REPORT

Q2 Interim Report

on July 10, 2013


basware interim report q1/2013/media/files/b/... · integration of certipost’s e-invoice business...

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